YOUR TICKET TO AN EU PASS­PORT

Those who can af­ford it are looking abroad to pur­chase prop­erty in or­der to en­ter res­i­dency pro­grammes that of­fer buy­ers two for the price of one: an off­shore hedge and res­i­dency. Which coun­tries of­fer the most ap­peal­ing res­i­dency pro­grammes and what do t

Finweek English Edition - - FRONT PAGE - By Glenda Williams

doors con­tinue to close on South Africans as­pir­ing to l ive abroad. And on their abil­ity to in­vest in hard cur­rency prop­erty mar­kets, earn in hard cur­rency mar­kets or even – given the oner­ous visa re­quire­ments for South African pass­port hold­ers – move around freely in these mar­kets.

A flat-lin­ing cur­rency, political mis­deeds and a soggy econ­omy have left those looking to achieve these am­bi­tions even fewer op­tions. With hardly any buy­ing power, off­shore prop­erty in­vest­ment is barely on the radar for lo­cals these days.

But South Africans are noth­ing if not tena­cious. And their “Plan B” is a for­eign res­i­dency or cit­i­zen­ship-linked prop­erty in­vest­ment pro­gramme, es­pe­cially those that en­able them free­dom of move­ment, set­tle­ment and em­ploy­ment within the EU.

Many po­ten­tial prop­erty in­vestors with no links to coun­tries out­side of South Africa see these pro­grammes as one of the few av­enues open to them to pro­vide fu­ture se­cu­rity and op­por­tu­nity for them­selves and their off­spring.

Pure cit­i­zen-by-in­vest­ment pro­grammes are now the pre­serve of only the uber-wealthy, so prop­erty-linked res­i­dency pro­grammes ap­pear to be the last Hail Mary for those from the rain­bow na­tion.

There’s a long list of coun­tries of­fer­ing res­i­dency and cit­i­zen-linked prop­erty in­vest­ment pro­grammes, many of them well be­yond the af­ford­abil­ity lev­els of lo­cals. For rand-poor South Africans the most “af­ford­able” prop­erty in­vest­ment res­i­dency pro­grammes in the eu­ro­zone are those of­fered by Greece and Latvia, both re­quir­ing a prop­erty in­vest­ment of €250 000.

But with high taxes, no work­ing or cit­i­zen­ship op­tions and an added mi­grant prob­lem, Greece is a non-starter for South Africans. Nor, it ap­pears, are they yet com­fort­able with Eastern Europe. Even Spain’s res­i­dency pro­gramme, out­flanked by the ben­e­fits that come with Por­tu­gal’s of­fer­ing, has not piqued the in­ter­est of many lo­cals.

Aside from near-neigh­bour and non-EU mem­ber Mau­ri­tius, South African in­ter­est has pri­mar­ily been di­rected at EU prop­erty-linked res­i­dency pro­grammes in Por­tu­gal, Malta and Cyprus – coun­tries that ranked first,

fourth, and 16th re­spec­tively in the Global Res­i­dence Pro­gram In­dex (GRPI) com­piled by global res­i­dence and cit­i­zen­ship plan­ning lead­ers, Hen­ley & Part­ners.

Prop­erty in­vest­ment costs cited in these pro­grammes ex­clude fee ap­pli­ca­tion costs, VAT and any other costs re­lated to the pur­chase such as stamp duty, trans­fer duty or le­gal costs – all ad­di­tional costs that need to be taken into ac­count when in­vest­ing off­shore whether for hedg­ing or res­i­dency pur­poses.

CYPRUS

The third-largest is­land in the Mediter­ranean and ex-Bri­tish colony is fast be­com­ing the res­i­dence of choice for an in­creas­ing num­ber of South Africans.

For South African ex­pats, Paphos is the pre­ferred area and it is here that Gary Player is cur­rently build­ing his sig­na­ture golf course.

Paphos, says Jenny El­li­nas, founder and man­ag­ing di­rec­tor of Cypriot Realty, is much like the Western Cape. “It is the agri­cul­tural lung of the is­land where most of the pro­duce is grown, where most of the golf es­tates are lo­cated and where more than 53% of Cyprus’s 2.6m an­nual tourists come on hol­i­day.”

El­li­nas be­lieves the strong up­take from South Africans for Cyprus’ res­i­dency pro­gramme has much to do with the pro­gramme ex­tend­ing to the en­tire im­me­di­ate fam­ily – main ap­pli­cant, spouse, all de­pen­dent chil­dren up to 25 years of age and both sets of par­ents. That comes at an ad­di­tional cost of €365 000, qual­i­fy­ing eight mem­bers.

Fur­ther ben­e­fit­ting Cyprus’s res­i­dency pro­gramme is that no cap­i­tal gains tax ap­plies to prop­erty pur­chased by 31 De­cem­ber 2016 and prop­erty trans­fer duty up to this pe­riod has been halved.

“Over the last nine months more than 50 South African cou­ples have taken up this op­por­tu­nity. And the list is grow­ing, with many in­vestors plan­ning a prop­erty in­spec­tion trip in the next few months,” adds El­li­nas.

At 12.5% Cyprus boasts the low­est cor­po­rate tax rate in Europe and as a re­sult, a num­ber of South Africans have set up busi­nesses there. They are in­vest­ing there too; JSE-listed At­tacq Group re­cently ac­quir­ing a 48.75% stake val­ued at €195m in two lead­ing shop­ping cen­tres in Cyprus’s cap­i­tal, Nicosia.

For­eign in­vest­ment may be pour­ing into Cyprus, €1.8bn of that in the last 18 months due to the per­ma­nent res­i­dency and cit­i­zen­ship pro­grammes on of­fer, but the is­land has not been with­out its share of prob­lems.

His­tor­i­cally, Cyprus has bat­tled ten­sions be­tween the Greek-held south and the Turk­ish-held north. And in the spring of 2013, the coun­try was mired in bad press af­ter the gov­ern­ment of Cyprus seized vast sums of for­eign in­vestors money (much of it Rus­sian) to aid in its bank­ing bailout. Po­ten­tial in­vestors have not for­got­ten this, nor should they.

MALTA

Lo­cated in the Mediter­ranean just south of the Ital­ian is­land of Si­cily, the charm­ing is­land of Malta is ex­pe­ri­enc­ing un­prece­dented in­vest­ment growth, strongly driven by its at­trac­tive cit­i­zen­ship-by­in­vest­ment and res­i­dency pro­grammes, as well as in­creased in­vest­ments by lead­ing in­dus­tries tak­ing ad­van­tage of Malta’s fi­nan­cial and eco­nomic sta­bil­ity.

The is­land’s fi­nan­cial ser­vices in­dus­try has grown rapidly in past years, con­tribut­ing 12% to GDP in 2015. And Malta boasts one of the best un­em­ploy­ment rates in Europe, only the Czech Re­pub­lic and Ger­many post­ing bet­ter fig­ures.

“Malta’s prop­erty mar­ket is hot,” says Merle Whale of Malta Life­style, “and South Africans are keen to in­vest for a num­ber of rea­sons: a hedge in eu­ros, at­trac­tive buy-to-let earn­ings with favourable tax­a­tion and one of the best res­i­dency op­tions in Europe of­fer­ing a Schen­gen visa. There has been a scram­ble to buy prop­erty, not only by South African buy­ers. A 46-apart­ment devel­op­ment re­leased a cou­ple of weeks ago sold within a week.”

Malta cur­rently of­fers two prop­erty-linked res­i­dence pro­grammes for non-EU nationals.

Ac­cord­ing to Dr Pierre Mif­sud, ad­vo­cate and part­ner at Mal­tese le­gal and tax ad­vi­sory firm EMD, un­der the Global Res­i­dence Pro­gram (GRP) the min­i­mum pur­chase price is €220 000 if pur­chas­ing in the south of Malta or Gozo, or €275 000 else­where in Malta. In this pro­gramme, a 15% flat tax rate is charged on for­eign-source in­come re­ceived in Malta, with a min­i­mum li­a­bil­ity of €15 000. In ad­di­tion, any in­come aris­ing in Malta would be tax­able at 35%.

Un­der the GRP in­di­vid­u­als may not spend more than 183 days in a cal­en­dar year in any other ju­ris­dic­tion. And the prop­erty pur­chased or rented must be the ap­pli­cant’s pri­mary res­i­dence and can­not be let or sub­let.

Un­like the GRP, the Malta Res­i­dence & Visa Pro­gramme (MRVP) (see box) is a pure im­mi­gra­tion pro­gramme with no an­nual in­come tax payable un­less you live in Malta, says Mif­sud. Nor are there any stay re­quire­ments un­der this pro­gramme. But un­der the MRVP the prop­erty and gov­ern­ment in­vest­ment must be kept for at least five years, ex­pands Mif­sud.

“Many South Africans in­vest around the popular seafront towns of St Ju­lians and Sliema while his­tor­i­cal wa­ter­front towns like Vit­to­riosa and Sen­glea are also ex­tremely popular,” says Gra­hame Salt, di­rec­tor of Mal­tese real es­tate com­pany HOQ.

South Africans have even opened small busi­nesses like bou­tique ho­tels and B&Bs, and brands fa­mil­iar to South Africans are also mak­ing their way to Malta – Ocean Bas­ket opened on the is­land last year.

POR­TU­GAL

For South Africans, Por­tu­gal’s Golden Visa res­i­dence by prop­erty in­vest­ment pro­gramme is a com­pelling op­tion be­cause of the res­i­dency and cit­i­zen­ship ben­e­fits built into the pro­gramme.

Ac­cord­ing to Chris Im­mel­man, MD of Pam Gold­ing Prop­er­ties In­ter­na­tional & Projects di­vi­sion (PGP), around 200 South African fam­i­lies have al­ready bought into the pro­gramme, 140 of them through PGP. Ninety per­cent of South Africans that are pur­chas­ing prop­erty in Por­tu­gal are do­ing so for the res­i­dency pro­gramme, says Im­mel­man.

The pro­gramme’s qual­i­fy­ing price of €500 000 is likely to bag in­vestors a qual­ity two-bed­room apart­ment in Lis­bon or the popular coastal town of Cas­cais, just 30km out­side of Lis­bon. One re­quire­ment of the pro­gramme is that the prop­erty is held for five years.

Por­tu­gal has re­cently also in­tro­duced a more af­ford­able res­i­dency-linked pro­gramme, its Golden Res­i­dence Pro­gramme, for old prop­er­ties ap­ply­ing to the pur­chase of prop­er­ties older than 30 years or in ur­ban re­newal ar­eas. Qual­i­fy­ing prop­erty in­vest­ment through this pro­gramme is €350 000.

“But,” says Im­mel­man, “these are prop­er­ties you have to ren­o­vate your­self and they are in ar­eas that we do not be­lieve have value. We have yet to find a devel­op­ment that is worth pre­sent­ing to South Africans.”

Por­tu­gal’s Golden Res­i­dence pro­gramme has emerged as the world’s best res­i­dence-by­in­vest­ment pro­gramme ac­cord­ing to Hen­ley & Part­ners, global leader in res­i­dence and cit­i­zen­ship plan­ning. The pro­gramme, in­tro­duced in 2012, has earned the coun­try €1.25bn.

But the coun­try’s Golden Visa pro­gramme has been hard-hit by ap­pli­ca­tion pro­cess­ing de­lays. That, ac­cord­ing to Fran­cisco Barata Salgueiro, se­nior part­ner at Neville de Rouge­mont At­tor­neys in Lis­bon, has been ad­dressed with pro­cess­ing now tak­ing around two to three months.

This €299 000 re­cently ren­o­vated one-bed­room, two-bath­room maisonette with study and ter­race in the heart of Sen­glea in Malta en­joys spec­tac­u­lar Val­letta habour and Fort St An­gelo views.

Jenny El­li­nas Founder and man­ag­ing di­rec­tor of Cypriot Realty

Dr Pierre Mif­sud Ad­vo­cate and part­ner at EMD

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